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Area Lawmakers Drafting Measure to Clarify Minimum Royalty Payments
HARRISBURG – A group of Northern Tier lawmakers in the Pennsylvania House of Representatives are working on new legislation that would clarify state law regarding the minimum royalty payment for landowners.

Reps. Sandra Major (R-Susquehanna/Wayne/Wyoming), Matthew Baker (R-Bradford/Tioga), Tina Pickett (R-Bradford/Sullivan/Susquehanna) and Garth Everett (R-Lycoming) are drafting legislation to directly respond to concerns by landowners who have drilling leases in their areas that their royalty payments have decreased due to post-production costs.

“When landowners signed leases stating that they would receive one-eighth of the value of the gas from their properties, they were not told that their share could be drastically reduced by a gas company’s accounting magic,” Everett said. “All the legislation we plan to introduce will do is help to make sure that landowners in Pennsylvania get treated fairly and receive what they were promised when they signed their leases.”

Long before the Marcellus Shale was discovered as a major natural gas deposit, a 1979 state law guaranteed a minimum royalty payment of one-eighth for oil, natural gas, or gas of any other designation. This was enacted to ensure fairness and protect landowners from deceptive leases.

“Our goal with this legislation is in seeking fairness and in making sure that landowners receive the minimum royalty, as guaranteed by state law, and that companies do not transfer post-production costs from that payment,” Pickett said.

Recently, some companies have attempted to reduce royalties below the statutory minimum by transferring post-production costs to royalty owners. These are costs that are incurred between the wellhead and a final market point of sale and typically include dehydration and transportation. When these expenses are deducted, final payments often result in royalty shares of less than one-eighth, which is equivalent to about 12.5 percent.

“This is an issue that impacts many residents in the Northern Tier who have entered into agreements with gas companies on the premises that they would be receiving a set royalty payment,” said Baker. “As state legislators, we are working to ensure fair treatment and protection of our landowners.”

“The bottom line is that the amount of the royalty payments promised landowners should not be lessened in order to offset costs the natural gas companies incur on their end,” said Major.

The pending legislation would clarify that the deduction of post-production costs from unconventional wells may not result in royalty payments less than the guaranteed minimum.

All four lawmakers participated in a June 27 public hearing of the Senate Environmental Resources and Energy Committee, chaired by Sen. Gene Yaw (R-Lycoming), to receive testimony regarding royalty stub transparency issues and post-production costs from the development of natural gas. Those offering testimony at the hearing were representatives from Pennsylvania Farm Bureau, National Association of Royalty Owners, Marcellus Shale Coalition, and Bradford County Board of Commissioners, along with Attorney Chris Jones of Griffin, Dawsey, DePaola and Jones, PC in Towanda.

The lawmakers are currently in the process of gathering support from co-sponsors.

Representative Matthew Baker
68th District
Representative Garth D. Everett
84th District
Representative Sandra Major
111th District
Representative Tina Pickett
110th District

Pennsylvania House of Representatives
Media Contact: Jennifer Keaton, 717.705.2094
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